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TMI Blog1967 (1) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... invalid. The order of assessment was made in respect of the year 1963-64, which was followed by a notice of demand served on the petitioner on 29th February, 1964, making the tax due and payable on March 10, 1964. Along with his appeal to the Deputy Commissioner, the petitioner made an application for stay of collection of the tax. An order was made by the appellate authority granting stay subject to the condition that the petitioner should furnish bank guarantee. Although the original time granted for furnishing that guarantee was extended by the appellate authority, the petitioner could not or did not furnish the security. It was after the expiry of the extended period that the original assessing authority proceeded to levy penalty under the impugned order. It was preceded by a notice dated 3rd May, 1965, reading : "You have not either paid the tax in arrears or furnished bank guarantee for the tax in arrears of Rs. 3,501.12 in respect of the assessment year 1963-64. You are hereby informed that if you fail to pay the tax of Rs. 3,501.12 within three days of the receipt of this notice, you will be treated as defaulter and penalty will be levied." The order itself, after sett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. " The main provision of sub-section (1) of section 41 has the clear effect of declaring a person a defaulter at a particular point of time, viz., the expiry of the time limited by the notice of demand under section 31 for payment of tax. In the absence of an appeal, nothing further is necessary either by way of an order or a notice by any of the authorities, functioning under the statute to make an assessee a defaulter for the purposes of the Act. Upon his so becoming a defaulter, certain consequences follow, viz., it becomes open to the authorities to take coercive steps to collect tax, and, secondly, the original authority is authorised by sub-section (1) of section 42 to impose a penalty. But where an appeal is presented by an assessee against an assessment order made against him, the position becomes subject to the provisions of the proviso appended to sub-section (1) of section 41. So long as the appeal remains undisposed of, it is open to the assessing authority in his discretion to treat the assessee as not being in default ; this means that the declaration of the assessee as a defaulter under the main provision of the sub-section becomes inoperative. That the entire si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion vested in the assessing authorities by those statutes is a judicial discretion or a discretion to be exercised judicially on a consideration of relevant circumstances is a well-established proposition. So far as this court is concerned, there is the decision reported in Esthuri Aswathaiah v. Income-tax Officer, which dealt with section 45 of the Indian Income-tax Act of 1922. The same or similar view has been taken by the Calcutta High Court in Aluminium Corporation of India Ltd. v. Balakrishnan, in which the court dealt with the discretion of the Wealth-tax Officer under sub-section (6) of section 31 of the Wealth-tax Act. According to that sub-section, when an assessee has presented an appeal, the Wealth-tax Officer may, in his discretion and subject to such conditions as he may think fit to impose in the circumstances of the case, treat the assessee as not being in default in respect of the amount in dispute in appeal, even though the time for payment has expired, so long as the said appeal remains undisposed. The position is more or less analogous to the position under the proviso to sub-section (1) of section 41 of the Agricultural Income-tax Act, except as to the special ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee as a defaulter by the assessing authority must be regarded as a positive decision intended to be communicated to the assessee. It is all the more so because, even if he should entertain the opinion or consider that the assessee should be treated as a defaulter, he is asked by the statute not to do so until he obtains an order to the contrary by the appellate authority. All these provisions are clearly intended as safeguards in the interest of the assessee and therefore are matters in which the assessee is interested, or matters which the assessee is entitled to claim, should be attended to and duly dealt with by the assessing authority. The reason is obvious, viz., that such a positive decision is the foundation for such serious consequence as the imposition of penalty to which he may be exposed. It is because these provisions are in the nature of such safeguards that the next question as to the nature and contents of the order assumes importance. If, as we have stated, both the proviso to section 41(1) as well as sub-section (1) of section 42 require or call for a passing of an order, and if, as pointed out by the cases already cited by us, both the matters proceed upo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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